Argan, Inc. Reports Third Quarter Results

ROCKVILLE, Md.–(BUSINESS WIRE)–Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today
announced financial results for its third quarter ended October 31,
2017. For additional information, please read the Company’s Quarterly
Report on Form 10-Q, which the Company intends to file today with the
U.S. Securities and Exchange Commission (the “SEC”). The Quarterly
Report can be retrieved from the SEC’s website at www.sec.gov
or from the Company’s website at www.arganinc.com.

Summary Information (dollars in thousands, except per share data
(unaudited)):

Third Quarter Results:

Revenues increased to $233 million, up 33% compared to the prior year
quarter, primarily due to Gemma Power Systems (GPS) having reached peak
and post-peak construction activities on four large, natural gas-fired
power plants. The power industry services segment continues to drive our
financial results and represents 91% of consolidated revenues for the
quarter ended October 31, 2017. Gross profit increased 3% to $38
million, primarily due to the increased revenues, while gross margin
percentage decreased from 20.8% to 16.2% compared to the prior year
quarter, which primarily reflected the achievement of final completion
of two natural gas-fired power plant projects in the prior year period,
as well as the effects of increased labor and subcontractor cost
estimates in the current period for certain projects.

Selling, general and administrative expenses increased $0.3 million to
$10.1 million, primarily reflecting the cost of a larger organization
necessary to support increased operations and to expand into new
markets. However, these expenses decreased as a percentage of revenues
to 4.3% from 5.6% in the prior year quarter. Other income increased $1.0
million quarter over quarter, due to increased yields and short-term
investment balances. There was no net income attributable to
non-controlling interests for the current quarter compared to $1.2
million in the prior year quarter, as activities on two large power
plant projects were completed last year by the joint ventures. The
income tax expense and effective rate were higher in the current quarter
as compared to the prior year quarter due to certain favorable
adjustments in the prior year quarter compared to unfavorable
adjustments in the current quarter. Exclusive of adjustments, the
estimated annual effective income tax is 36.7% for the current year
compared to 35.2% at this time last year, an increase primarily due to
the decrease in non-controlling interests. These factors resulted in net
income attributable to our stockholders decreasing 5% to $17.2 million,
or $1.09 per diluted share, compared to $18.1 million, or $1.16 per
diluted share, for the prior year quarter. EBITDA attributable to the
stockholders for the quarter ended October 31, 2017 increased 12% to
$30.3 million, or $1.92 per diluted share, from $27.0 million, or $1.73
per diluted share, for the prior year quarter.

Nine Month Results:

For the nine months ended October 31, 2017, consolidated revenues
increased 54% to a record $723 million over the prior year period,
primarily due to the ramped-up, peak and post-peak construction
activities of GPS on four large, natural gas-fired power plants. The
power industry services segment represented 92% of consolidated revenues
for the nine months ended October 31, 2017. Gross profit increased 19%
to $129 million, primarily due to the increased revenues, while gross
margin percentage decreased from 23.3% to 17.9% compared to the prior
year period, reflecting the reason discussed above, the changes in the
mix and progress of various power plant projects and the differences in
their respective gross margins.

For the reasons discussed above, for the nine months ended October 31,
2017, selling, general and administrative expenses increased $6.0
million to $30.4 million, other income increased $2.9 million and net
income attributable to non-controlling interests decreased 96%, or $6.4
million over the prior year period. In addition, as described above,
income tax expense increased $10.6 million due to higher pre-tax income,
an increased estimated annual effective income tax and other
adjustments. These factors resulted in net income attributable to our
stockholders for the nine months ended October 31, 2017 increasing 30%
to $65.0 million, or $4.11 per diluted share, compared to $50.0 million,
or $3.23 per diluted share, for the prior year period. EBITDA
attributable to the stockholders for the nine months ended October 31,
2017 increased 33% to $105.4 million, or $6.68 per diluted share, from
$79.3 million, or $5.12 per diluted share, for the prior year period.

The Company’s balance sheet continues to strengthen. As of October 31,
2017, cash, cash equivalents and short-term investments totaled $484
million and net liquidity was $292 million. The Company has no bank
debt. The work performed in the quarter reduced the contract backlog to
$0.5 billion as of October 31, 2017, including Atlantic Projects
Company’s (APC) contract to perform certain EPC services for the
expansion of an existing gas-fired power station in Spalding, England
that was added to backlog during the quarter.

Commenting on Argan’s results, Rainer Bosselmann, Chairman and Chief
Executive Officer, stated, “On a trailing twelve-month basis, we have
reached $930 million in revenues, $85 million in net income and $137
million in EBITDA. Our fiscal year results just two years ago were less
than half of each of these amounts. This growth is a direct result of
our execution on major EPC projects in this increasingly challenging
market over the past two years. We are proud of this growth and these
results, and we are pleased to have added some great projects in the
United Kingdom to our backlog, but we know we need to add many more. We
remain hard at work in those efforts as we endeavor to continue
increasing long term shareholder value.”

About Argan, Inc.

Argan’s primary business is providing a full range of services to the
power industry including the engineering, procurement and construction
of natural gas-fired power plants, along with related commissioning,
operations management, maintenance, project development and consulting
services, through its Gemma Power Systems and Atlantic Projects Company
operations. Argan also owns SMC Infrastructure Solutions, which provides
telecommunications infrastructure services, and The Roberts Company,
which is a fully integrated fabrication, construction and industrial
plant services company.

Certain matters discussed in this press release may constitute
forward-looking statements within the meaning of the federal securities
laws and are subject to risks and uncertainties including, but not
limited to: (1) the continued strong performance of our power industry
services business; (2) the Company’s ability to successfully and
profitably integrate acquisitions; and (3) the Company’s ability to
achieve its business strategy while effectively managing costs and
expenses. Actual results and the timing of certain events could differ
materially from those projected in or contemplated by the
forward-looking statements due to a number of factors detailed from time
to time in Argan’s filings with the SEC. In addition, reference is
hereby made to cautionary statements with respect to risk factors set
forth in the Company’s most recent reports on Form 10-K and 10-Q, and
other SEC filings.

Management uses EBITDA, a non-GAAP financial measure, for planning
purposes, including the preparation of operating budgets and the
determination of appropriate levels of operating and capital
investments. Management believes that EBITDA provides additional insight
for analysts and investors in evaluating the Company's financial and
operational performance and in assisting investors in comparing the
Company’s financial performance to those of other companies in the
Company’s industry. However, EBITDA is not intended to be an alternative
to financial measures prepared in accordance with GAAP and should not be
considered in isolation from the Company’s GAAP results of operations.
Consistent with the requirements of SEC Regulation G, reconciliations of
the Company’s non-GAAP financial results from net income are included in
the presentations above and investors are advised to carefully review
and consider this information as well as the GAAP financial results that
are presented in the Company’s SEC filings.

Contacts

Argan, Inc.
Company Contact:
Rainer Bosselmann,
301-315-0027
or
Investor Relations Contact:
David
Watson, 301-315-0027